International HR and Payroll Process Harmonisation: Fundamental strength to business agility and ongoing transformation

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HR.Payroll.Benefits.
International HR and Payroll Process Harmonisation:
Fundamental strength to business agility
and ongoing transformation
Can your HR Support
International growth?

2 | Fundamental strength to business agility and ongoing transformation
The HR challenges that arise as international expansion
gathers pace become central to an organisation’s success
or failure. HR is a company’s backbone with payroll being
the key way to recognise the most important asset.
As such, core HR touches every aspect of a business, and
the health of an organisation depends on how well core HR
data and functions are integrated with company systems.
Research by ADP has found that 89% of companies
believe that having a complete view of their employees is
“critical.” Yet only 30% of them actually have that complete
overview, meaning that they are in turn exposed to risk and
compliance issues.
A lack of standardised HR or integrated payroll fast
becomes a problem for multinational corporations. The
dream is of harmonised payroll in an organisation’s
subsidiaries throughout the world. Yet in practice,
companies operating in several countries worldwide have
to cope with very different payroll rules. The complexity
of international payroll can even make companies think
twice about expanding into new lucrative markets at all,
thus limiting their opportunities for growth and restricting
expansion into new markets.
The challenges and barriers to succeed internationally
therefore come down to standardisation. Yet, few
organisations know how to do it, or dare to even try. It is
helpful to understand the main challenges, see where
organisations are going wrong, and identify where HR can
step in to put it right.
89%
of companies believe
that having a complete
view of their employees
is “critical.”
Only 30% of companies have
that complete view.

Fundamental strength to business agility and ongoing transformation | 3
International Challenge 1: Costs
Multiple Local
Payroll Systems
Increase Cost
HR departments are under constant pressure to contribute to overall
company savings and to find ways to reduce costs. The ADP white
paper, ‘Payroll at the heart of HR Outsourcing’ finds that payroll
combined with personnel and benefits administration account for
35% of total HR costs – or approximately $525 per FTE.
Payroll costs represent nearly half of this, reaching an average of
$250 per FTE per year with variations by country. There are invisible
costs too which are often over-looked as part of the due diligence
process but impact the companies’ bottom-line. IT components form
the greatest part, with software fees, maintenance and upgrade fees,
system integration and interfaces, hardware and subcontracting
costs, and time spent by staff on payroll systems. Multiply this with
the number of countries HR serves and the costs can be substantial.
As organisations expand internationally they typically will either
implement multiple local payroll systems (in-house or outsourced to
multiple providers), or leverage the existing tools.

Pulling Together Fragmented
Systems
For companies with multiple local payroll systems, data
consolidation adds to the cost. Pulling together reports
generated by different systems is time consuming.
Philippe Mennrath, HR Director at KNAUF, a global
supplier of building materials, explains, “It’s a very hard
thing to buy competitors, one very difficult challenge
is to integrate people into the payroll. They have other
systems that you have to understand and to integrate
into our group. I have no communication between the
systems, so I need to use Excel, phone calls or email to
have an idea of how many people we have each month.”
The administrative burden of managing multiple systems
or vendors requires endless consolidation of information
and reports. The resources required not only adds to the
cost – it also impacts the ability to make good and timely
business decisions.
Local Systems for Global Use
Pepita Morales Saldana, Global Payroll Manager at
TomTom, a provider of GPS navigation which has gone
from having a few offices in The Netherlands in 2006
to being operational in 40 countries today, recalls, “We
were using a local Dutch payroll system and were using
it as an HRIS system which you can imagine gave us a
lot of difficulty. We had one local Dutch system and in
there we had to register all the information of all the
employees worldwide. There is a lot of local information
that you need to store but your system is not built for
global information - it’s just built for the local Dutch
information.” Running international payroll in this
way is time consuming and increases the costs of IT
infrastructure, support and regular maintenance.
“It’s a very hard thing to
buy competitors, one very
difficult challenge is to
integrate people into the
payroll. They have other
systems that you have to
understand.”
Philippe Mennrath, KNAUF
A single vendorwith a singlecontractprovidestransparencyon the costs.

“There is a lot of local
information that you need
to store but your system
is not built for global
information.”
Pepita Morales Saldana, TomTom
Is There a Better Way?
The Webster Buchanan Research report, ‘Multi-
country Payroll: Analysing the Business Benefits and
Challenges’, argues that the cost will be a key component
of most multi-country payroll business cases, and
where “organisations automate manual systems or
streamline processes, there will be a potential for direct
cost-savings.”
Jeitosa Group International’s Global Benchmarking
Study (GBS) found that “High-performing organisations
are far more likely to have a global payroll team that has
both visibility to and accountability for the functioning of
payroll at the country level across the entire enterprise.”
TomTom have developed a shared services centre where
payroll has been outsourced, providing standardised
processes and services with a better management
of costs. “The fees are very clear so we have a good
understanding about the costs that are involved with
payroll. It is also not possible to have an expert in
each country. So that’s why we also need to buy in that
knowledge because we have a lot of countries with a
few employees and it’s not cost effective to have a local
payroll specialist in each country,” say Morales Saldana.
BENEFITS OF
STANDARDISED
PROCESSES TO
TACKLING COST:
• Predictable and scalable fees
• One pricing scheme per region with a
single invoice and single currency for
invoicing
• Reduces Total Cost of Ownership (TCO)
with managed services that eliminate
maintenance and infrastructure costs
• Simplifies workflows by automatically
updating country payroll data from
central ERP or HRIS
• Strives to reduce costly errors that stem
from lack of knowledge or visibility
• Provides awareness of overall payroll
costs with a single invoice for all your
countries
• Keeps systems updated with changing
national statutes and payroll legislation
• Facilitates regionalisation or shared
services initiatives by providing a single
platform and user interface for global
payroll processing
Dierk Russell, HRIS Manager EMEA at Covidien, a
medical devices company that went from a fragmented
payroll to a standardised outsourced model in EMEA,
comments, “Before outsourcing we weren’t able to
review or analyse the costs. Now it is very simple as it’s
one contract.”
A single vendor with a single contract provides
transparency on the costs making budgeting and
financial planning easier, while relieving companies of
the tedium of back-office functions. This enables them
to focus on business expansion and other operational
strategies while controlling costs.

International Challenge 2: Flexibility
Adapting
to Market
Conditions and
a Changing
Business World
Having systems and processes that make change
very difficult limits the organisations’ flexibility and
reactivity to market conditions. Poorly managed HR
and payroll can crush any such desire for flexibility as
internal teams find all their time and resources become
devoted to simply keeping up with the monthly (or
weekly) pay rounds instead of supporting the business.

Out of the 161 respondents to the Ernst & Young Global
Payroll Survey, 68 are considering expansion into new
markets within the next year. Only 11% of these, however,
were in the process of actively pursuing a global payroll
solution implementation as part of their expansion. The
growth of these businesses will be limited as HR will try
and cope with the local laws and getting new people into
the business.
Local Expertise is Critical
As organisations move into new geographies, they
typically also lack local expertise. If there is no knowledge
of local payroll practices, this creates risk. Regulations
may vary by region, by city, by business activity with
collective agreements, or by company with company
agreements. When all these factors are combined,
things start to get extremely complicated. Brazil, for
example, has more than 10,000 union agreements and
Japan nearly 300 different minimum wages, which
vary from branch to branch and from region to region.
In France, legal changes in 2014 impacted all aspects
of HR: payroll with DSN (registered social statement),
labour union relationship with BDES (basis of economic
and social data), talent management with training
reform, and benefits with CICE (tax credit of competitive
employment).
The frequency of legislative changes and the complexity
of incorporating them either lessens, or intensifies the
first. For example, in one calendar year, there were over
20,000 changes in payroll regulation globally. Adding to
this pressure, the time companies have to implement
changes required by new tax, employment, and payroll-
related compliance regulations is shrinking.
Downsizing and Growth
Papyrus, a merchant in paper, supplies and industrial
packaging, is operating in a declining industry where
competitiveness is the key to success and is restructuring
the organisation accordingly. “The big challenge for
Papyrus is to adapt our structure. We are starting to
adapt our HR tasks and payroll to be more competitive,
stronger, to be more efficient, and to take the time to
implement other HR tasks and not to use all our time on
payroll. It will provide more flexibility and responsiveness
to the business to help it adapt to market changes” says
Karima Cherifi, HR Director at Papyrus France.
Only 11%of
companies will implement a
global payroll solution when
expanding internationally.
In contrast, Yankee Candle, a manufacture of scented
candles, has been experiencing global growth of 30% per
year with “HR systems that could not cope” according to
Rachael Merrett, Financial Controller at Yankee Candle.
“We just didn’t really know personal information about
employees because there were so many new people
that HR couldn’t keep up. The HR system was very poor
and there was just nothing linked up at all. The records
weren’t up to date and staff had no control over putting
their holiday requests in. Those were never updated
anywhere centrally, it was all manually done.”
“In one calendar year, there
were over 20,000 changes
in payroll regulation
globally.”

Findings from a study conducted by CFO Research in
collaboration with ADP show that more than 60% of
CFOs surveyed agree that companies have experienced
increased pressure to respond to tax, employment and
payment-related regulations in increasingly shorter
timeframes during the past two years.
Understanding and managing the volume of changes
is a monumental task for HR, taking up staff time and
resources. Greater complexity and risk often results in
reduced flexibility and strategic input.
Simplicity and Standardisation is
Key to True Flexibility
The Jeitosa Group International report, ‘Driving Globally
Strategic Payroll: The Paradoxical Journey to Efficiency
and Innovation’, argues that, “A key characteristic of
the International model is that it is especially adept
at understanding the needs of its local business units
and sharing best practices and innovations across the
global organisation.” At Papyrus they understand that
investments in HR and payroll is important, “We had
to change our policy. It’s a cost saving policy but it’s to
also share best practices between the countries” says
Karima Cherifi of Papyrus France.
HR standardisation offers the potential for increased
flexibility for HR, offering more efficient and cost-
effective processes. Companies can free themselves
from having to deal with a host of different regulations,
employee policies, labour conditions, currencies,
languages, and directives. As they globally outsource
payroll, companies consolidate consistent processes
for all the countries in which they operate.
Global payroll outsourcing offers multinationals of
all sizes additional flexibility as they grow. Emerging
businesses are relieved from acquiring local payroll
knowledge as they settle in new countries. They simply
ask their supplier to “open another country”.
BENEFITS OF
STANDARDISED
PROCESSES TO
ENHANCING
GLOBAL
FLEXIBILITY
• Service offerings and operating
models that align all sizes and types of
organisations
• Extended geographical coverage
• Responsibilities and risks transferred to
the third party provider
• Compliance with local legislation
worldwide
• Internal alignment and the sharing of
best practices across all subsidiaries
using the same HR policies and reference
data
• Everyone speaks the same language:
company management obtains
consistent indicators, resulting in easy-
to-consolidate reports and greater
accountability
• Multinational payroll services helps
companies support their global
workforce with optimised investment in
infrastructure, software maintenance
and systems consolidation
• Having a single supplier for many
countries reduces vendor technology
costs
Poorly managed HR and
payroll can crush any
desire for flexibility.

Fundamental strength to business agility and ongoing transformation | 9Fundamental strength to business agility and ongoing transformation | 9
Having a global view of the workforce is essential for executives
managing their business, but only very few actually have this.
Fragmented systems will not provide that single version of the truth,
decisions being made based on information from disparate systems
will not be accurate or up to date, introducing uncertainty into key
decision making processes - making it impossible to provide data for
business strategy or monitor key performance indicators for HR.
Rachael Merrett of Yankee Candle recalls that before transforming
HR and outsourcing, “We just didn’t know the information we needed
about our people. This was not acceptable for the size of our business.
Our US office was asking us for more and more information about
headcount, what type of people they were (salaried or hourly paid,
male or female, or average salaries). There was no control.”
International Challenge 3: Control
Are You in Control
or Are You Being
Controlled?

HR standardisation
offers the potential for
increased flexibility.
Too much time is spent by HR getting the right data
before they can make decisions or before they can
assess the impact of decisions that have been made.
Not only is time taken up in getting and collating that
data, but also making sure that the data is accurate.
For Karima Cherifi of Papyrus France, “We have a cost
saving policy in place, so knowing the number of FTEs
is very important for forecasting and budgeting. Each
month we have to rate ourselves against set rules on
errors in payroll. My objective is to have 99% payroll
efficiency, and this has to be achieved in parallel with
other KPIs around severance costs and numbers of full-
time employees. Now we have extremely good visibility
on things like this. We can exchange lots of data between
management teams thanks to our outsourcing and
standardisation of payroll.”
Data visibility and a standardised set of processes
enables companies to make real time critical business
decisions and focus on the strategy of your company.
Dierk Russell of Covidien notes, “With consolidated
reporting we know obviously a lot more about our
payroll than we ever were able to do. Even with a good
finance system and good chart of accounts the type of
analysis we have today is far beyond what we used to
be able to do.” Visibility into the overall workforce is key
and requires common policies and standardisation of
processes to track key metrics and provide insights.
Internationalisation Needs
Standardisation
A single data repository that enables reporting and
analytics requires an integrating of HR data, common
policies, processes, and tasks into one platform. With
37% of mid-sized companies’ data left sitting in Excel
(ADP Global HCM Study, January 2014) or similar types
of databases, the value of putting all data in one system,
accessible to not just HR, but also leadership, managers
and employees, cannot be underestimated. This was
the case for Yankee Candle, “Payroll was incredibly time
consuming, so when it was manual we used to have to
collect manually, put it into a spread sheet, send the
spread sheet to payroll, get a spread sheet back, analyse
it - it was just ridiculously time consuming.”
The Webster Buchanan Research report, ‘Multi-country
Payroll: Analysing the Business Benefits and Challenges’
identifies that “every international payroll function is
geared up to meet unique local regulatory and business
requirements, they tend to evolve on a country-by-
country basis, with little standardisation around best
practices and processes.” Most multinationals will use
a mix of in-house and outsourcing. “In a large company
operating in a dozen countries, for example, you could
easily find 15-20 different processing partners.” It can be
difficult to get visibility into individual payroll operations,
ensuring they’re all compliant and guard against fraud.
For Yankee Candle there has been a massive impact,
“Now, I can run ad-hoc reports, I can write reports, and
I can interrogate the data all of the time. We can now
extract reports that talk to our finance system. This has
paid dividends because now we can easily put wage data
into our ERP system,” says Rachael Merrett of Yankee
Candle.
37%
of mid-sized companies’
data is in spread sheets.

Conclusion
International expansion goes hand-in-hand with ever-
changing local compliance requirements, keeping
control and visibility of multiple subsidiaries, people-
related costs and the need to protect a company’s
most sensitive information. An effective multi-country
payroll solution would appropriately address platform
compatibility, integrate data and centralise multi-
country information at both local and global levels. It
would also adequately standardise service levels across
vendors and integrate knowledge of local compliance.
Centralisation is the key to streamlined service
delivery and an HR operating model which world-class
organisations are seeking to embrace. A network of
in-country payroll specialists with deep knowledge of
local legislation and HR details would lighten the load of
shared services centres or local subsidiaries. By finding
new ways to help maintain compliance and mitigate risk,
improve business process efficiencies and, ultimately,
help to drive organisational growth and international
expansion, HR can demonstrate the strategic value they
provide to the company.
The value of having all
data accessible to HR,
leadership, managers
and employees, cannot
be underestimated.
The least innovative or agile organisations will see
this as a fearful prospect. Those that will succeed in
the global marketplace and expand globally, however,
will embrace the benefits of standardised core HR and
payroll – and will do so with HR leaders at the helm.
BENEFITS OF
STANDARDISED
PROCESSES TO
INCREASING
CONTROL:
• Consistent SLAs and KPIs across the
international organisation
• Central BPM systems to monitor payroll
and human resources administration
data workflow
• Single systems allows for multi-country
consolidated HR reports
• Responsibilities and risks transferred to
the third party outsourcing provider
• Compliance with local legislation
worldwide
• Change is much more fluid and effective
when implemented across an entire
organisation
• Moving all regions to a single platform
means teams feel the impact only once,
with no extended reaction over time

With more than $12 billion in revenues and 65 years of experience, ADP®
(Nasdaq: ADP) serves
approximately 637,000 clients in more than 125 countries. As one of the world’s largest providers of
business outsourcing and Human Capital Management solutions, ADP offers a wide range of human
resource, payroll, talent management, tax and benefits administration solutions from a single source, and
helps clients comply with regulatory and legislative changes, such as the Affordable Care Act (ACA). ADP’s
easy-to-use solutions for employers provide superior value to companies of all types and sizes. ADP is
also a leading provider of integrated computing solutions to auto, truck, motorcycle, marine, recreational
vehicle, and heavy equipment dealers throughout the world.
For more information about ADP, visit the company’s Web site at www.ADP.com.
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All other marks are the property of their respective owners.
Copyright © 2014 ADP, LLC.

International HR and Payroll Process Harmonisation: Fundamental strength to business agility and ongoing transformation

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